Most people take on debt when it comes to the larger purchases in life. Companies are no different. They need cash to make growth and innovation occur. But there are times when earnings are less than anticipated, and the debt becomes untenable. Paying off debt instead of plowing resources back into the business can drain resources and vision. With this idea in mind, we ran a screen to find industrial stocks that are relatively debt free. In addition, we narrowed our search to only include those that received 'Buy' or 'Strong Buy' ratings from industry analysts. We came up with a solid list of companies for you to begin your own investigation.
The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
We first looked for industrial stocks. From here, we then looked for companies that have maintained a sound long term capital structure (Long Term D/E Ratio<.1). From here, we then looked for companies that have maintained a sound capital structure (D/E Ratio<.1). We then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We did not screen out any market caps.
Do you think these stocks are undervalued and should be trading higher? Use this list as a starting-off point for your own analysis.
1) McDermott International Inc. (MDR)
|Long Term Debt/Equity Ratio||0.05|
McDermott International, Inc. operates as an engineering, procurement, construction, and installation (EPCI) company worldwide. It focuses on designing and executing complex offshore oil and gas projects. The company offers EPCI services for offshore oil and gas field developments; and delivers fixed and floating production facilities, pipelines, and subsea systems from concept to commissioning. It engages in the fabrication and installation of fixed and floating structures; installation of pipelines and subsea systems; and provision of shallow and deepwater construction services. The company's customers include integrated and national oil and gas companies. McDermott International, Inc. was founded in 1923 and is based in Houston, Texas.
2) Chase Corp. (CCF)
|Industry||Industrial Equipment & Components|
|Long Term Debt/Equity Ratio||0.05|
Chase Corp., together with its subsidiaries, engages in the manufacture of protective materials for various applications. The company operates in two segments, Industrial Materials and Construction Materials. The Industrial Materials segment offers electrical cable insulation tapes, specialty tapes and related products, water blocking compound, insulating and conducting materials, laminated durable papers, flexible packaging materials, slit films, flexible composites and laminates, protective conformal coatings, and moisture protective electronic coatings. This segment sells its products to wire and cable, electrical and electronic, telecommunications, envelope converting and commercial printing, and aerospace industries under the Chase & Sons, Chase BLH2OCK, PaperTyger, Chase Facile, Insulfab, and HumiSeal brand names. The Construction Materials segment provides protective pipe coating tapes and other protectants for valves, regulators, casings, joints, metals, concrete, and wood; a polymer additive for waterproofing of approaches and bridges, ramps, race tracks, airports, and specialty road applications; waterproofing sealants, expansion joints, and accessories; anti-corrosive products for gas, oil, and marine pipelines; tapes and membranes for roofing and construction; and coating and lining systems for liquid storage and containment. This segment offers its products to oil companies, gas utilities, and pipeline companies, as well as to transportation, industrial, and architectural markets under the brand names of Royston, Rosphalt50, Tapecoat, Eva-Pox, Ceva, CIM, and ServiWrap. The company sells its products through own sales force, manufacturers' representatives, and distributors. Chase Corporation was founded in 1946 and is headquartered in Bridgewater, Massachusetts.
3) Met-Pro Corp. (MPR)
|Long Term Debt/Equity Ratio||0.03|
Met-Pro Corporation manufactures and sells product recovery and pollution control equipment for the purification of air and liquids, fluid handling equipment, and filtration and purification products. The company's Product Recovery/Pollution Control Technologies segment provides solutions and products for product recovery and pollution control applications in metal finishing and plating, wastewater treatment, composting, food processing, ethanol production, chemical, petrochemical, printed circuit, semiconductor, steel pickling, battery manufacturing, groundwater remediation, automotive, aerospace, furniture, painting, electronics, printing, and pharmaceutical industries. Its Fluid Handling Technologies segment manufactures horizontal, vertical, and in-tank centrifugal pumps used for the pumping of acids, brines, caustics, bleaches, seawater, waste liquids, and high temperature liquids for industrial and commercial applications. This segment serves various industrial markets, including the chemical, petrochemical, refinery, pharmaceutical, plastics, pulp and paper, and food processing industries, as well as commercial users, such as hospitals, universities, and laboratories. The company's Mefiag Filtration Technologies segment designs, manufactures, and sells filtration systems. Its Filtration/Purification Technologies segment offers chemicals for the treatment of municipal drinking water systems, and boiler and cooling tower systems; cartridges and filter housings; filtration products for industrial air and liquid applications; custom pleaters, filter cartridges, and standard filters; and water treatment compounds. The company markets and sells its products through its personnel, distributors, representatives, agents, regional sales managers, market-based distributors, and original equipment manufacturers in the United States and internationally. Met-Pro Corporation was founded in 1966 and is headquartered in Harleysville, Pennsylvania.
4) Powell Industries, Inc. (POWL)
|Industry||Industrial Electrical Equipment|
|Long Term Debt/Equity Ratio||0.01|
Powell Industries, Inc. engages in the design, development, manufacture, and servicing of custom engineered-to-order equipment and systems for the management and control of electrical energy and other critical processes in transportation, environmental, energy, industrial, and utility industries. The company operates in two segments, Electrical Power Products and Process Control Systems. The Electrical Power Products segment offers electrical power distribution and control systems that are used to distribute, monitor, and control the flow of electrical energy, as well as to provide protection to motors, transformers, and other electrically-powered equipment. It offers power control room substation packages, traditional and arc-resistant distribution switchgear, medium-voltage circuit breakers, offshore generator and control modules, monitoring and control communications systems, motor control centers, and bus duct systems directly to end-users or to engineering, procurement, and construction firms. This segment serves oil and gas producers, oil and gas pipelines, refineries, petrochemical plants, electrical power generators, public and private utilities, co-generation facilities, mining/metals operations, pulp and paper plants, transportation authorities, governmental agencies, and other industrial customers. The Process Control Systems provides technology solutions, including instrumentation, computer controls, and communications and data management systems to control and manage critical processes and facilities; and technical services to deliver these systems. This segment sells its products and services directly to end-users in transportation, environmental, and energy sectors. The company has operations in Europe, the Far East, the Middle East, Africa, North America, South America, and Central America. Powell Industries, Inc. was founded in 1947 and is headquartered in Houston, Texas.
5) CaesarStone Sdot-Yam Ltd. (CSTE)
|Long Term Debt/Equity Ratio||0.01|
Caesarstone Sdot-Yam Ltd. manufactures and sells engineered quartz surfaces under the Caesarstone brand. Its products consist of engineered quartz slabs, which are used as kitchen countertops in the home renovation and remodeling end markets, as well as other applications, including vanity tops, wall panels, back splashes, floor tiles, stairs, and other interior surfaces in various residential and non-residential applications. The company primarily sells its products directly to fabricators and sub-distributors; and indirectly through a network of independent distributors to fabricators in 42 countries. Caesarstone Sdot-Yam Ltd. was founded in 1987 and is headquartered in MP Menashe, Israel.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/25/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.